Insurer not liable for cancelled music festival

By Resolve Editor Kate Tilley

An insurer has been found not liable to cover expenses for the cancellation of a music festival allegedly threatened by bushfires.

Federal Court Justice Ian Jackman found the answer to three separate questions was no.

Was the cancellation or abandonment of the 2019 Subsonic Music Festival
(a) necessary and
(b)   the sole and direct result of a cause
(i)    not otherwise excluded by the policy and
(ii)   beyond the control of the organiser.
If not, does s54 of the Insurance Contracts Act 1984 prevent the insurer from refusing to pay the claim?
Is the insurer liable to reimburse the organiser for net losses following the cancellation of the festival?

Scott Commens, trading as Subsonic Music, had purchased an event cancellation policy with Lloyd’s underwriters for the festival scheduled to be held on 5-9 December 2019 at a property called Riverwood Downs at Monkerai, 190km north of Sydney.

Mr Commens argued he was forced to cancel the festival because of bushfires burning in the NSW mid-north coast region in November 2019. His alternative case was that the cancellation was because of drought conditions affecting the area.

Adverse weather endorsement

The policy included an adverse weather endorsement and defined adverse weather as extreme weather conditions that:

a)    occur on the day(s) of the event and which are deemed by the event organiser to pose a serious threat to the safety of those attending the event, and/or
b)    occur during the policy period and which result in conditions which the local authority considered to pose a serious threat to the safety of those attending the event, and/or
c)    occur during the policy period and which prevent the insured or event organisers from undertaking the necessary set up to enable the event to proceed due to:
ii)    concern for the safety of those responsible for the set up or
iii)   reasons of physical impossibility.

The policy said the insured bore the burden of proving that a loss resulted from adverse weather.

Justice Jackman found the actual reason for the property owner, Christopher Hall, who ran the property with his wife and two daughters as a rural retreat providing accommodation, was the onerous conditions proposed to be imposed by the Mid Coast Council.

Mr Hall cancelled Riverwood Downs availability as the venue for the 2019 festival on 12 November 2019 because he believed Mr Commens had insufficient time available to satisfy the conditions.

While bushfires meant the council’s decision on Subsonic’s development assessment (DA) was postponed by two weeks from 13 to 27 November 2019, Justice Jackman said that was “causally irrelevant to the decision by Mr Hall as he regarded a decision on 13 November 2019 as leaving insufficient time to comply with the conditions”.

While the risk of bushfires may have been the initial catalyst for Mr Commens to seek an alternative venue at Hope Estate, in the Hunter Valley, in late October 2019, the reason he pursued negotiations from 14 to 20 November 2019 was because of the Mid Coast Council’s “onerous and untimely … conditions” and Mr Hall had already cancelled.

Bushfire risk insufficient

“The risk of bushfires was neither a necessary nor a sufficient cause of Mr Hall’s decision to cancel the festival. The risk of bushfires was not a necessary cause because, although bushfires may have contributed to the timing of Mr Hall’s decision to cancel the festival, that decision would probably have been made in any event,” Justice Jackman said.

“And the risk of bushfires was not a sufficient cause because if Mr Commens had secured a DA much earlier and/or with improved conditions, the festival would probably not have been cancelled.”

Justice Jackman said contemporaneous documents, particularly correspondence between Mr Commens and Riverwood Downs, confirmed that Mr Hall’s decision to cancel was the reason the festival did not go ahead.

When asked by planning consultant Stephen Leathley for written confirmation from the Rural Fire Service that the event had to be moved because of fires, Mr Commens responded that: “[It’s] actually the site [that] wants it moved … Very inconvenient considering the timing. I have landholder consent and recommendation for approval from the planners going to council tomorrow. It will likely get approved, but Riverwood Downs have done a backflip on me.”

Justice Jackman said that demonstrated that neither bushfires nor drought conditions were the actual ground adopted by Mr Hall or Mr Commens in making their respective decisions to cancel the festival.

“The reason for Mr Hall’s decision to cancel the event at Riverwood Downs was the onerous and late imposition of conditions on the DA by the council. The cause of Mr Commens’ decision to cancel was [because] Mr Hall had decided to cancel the event and Mr Commens could not find a suitable alternative venue.”

Exclusion clauses

That enabled the insurers to rely on exclusion clauses because Mr Commens had not made the “necessary arrangements” or have the “necessary authorisations”, including the council DA and the landowner’s consent.

Justice Jackman said Mr Hall told Mr Commens soon after the 2018 Subsonic Festival that Mr Commens needed to get a new DA into council in January 2019 so he could start to get sales. “Mr Commens did not follow that advice and lodged an application to modify development consent with the council only on 16 July 2019.”

While Mr Hall said during November 2019 that the conditions proposed by the council were impossible to comply with or not financially viable, he accepted that, with the benefit of hindsight, he was wrong about Mr Commens’ ability to comply with the 2019 conditions because in 2023 the festival went ahead successfully on almost exactly the same conditions as those imposed in 2019.

Justice Jackman said it was likely that, if Mr Commens had followed Mr Hall’s advice and applied to the council six months earlier, he probably could have satisfied Mr Hall’s concerns about his ability to meet the DA conditions.

Mr Commens also had failed to procure a signed venue hire agreement with Riverwood Downs. While that usually happened in the week or two before the festival when the Subsonic team arrived to set up the venue and “bump in”, Justice Jackman said such an arrangement was neither timely nor prudent.

“The owners of Riverwood Downs were at liberty to withdraw their support in the absence of any contract obliging them to allow the festival to be held on their land, and it strikes me as imprudently risky to wait until the bump-in period for Mr Commens to obtain a binding promise from the owners.”

Commens t/as Subsonic Music v Certain Lloyd's Underwriters subscribing to Policy No ALTCNX1900332 (trial judgement) [2024] FCA 434 (29 April 2024)
Barry Nilsson commentary on the case.